With Brexit finally materializing on January 31st, London-based fintech companies are among businesses facing the most uncertainty. As an increasing number of fintechs started to look for alternatives to London ever since Brexit referendum took place, Vilnius – the capital of Lithuania – became one of the prime European cities for such fintechs to relocate to
January 28, 2020. Since the Brexit referendum in 2016, fintech companies in London have been looking for relocation options to continue their businesses inside the EU. This is particularly relevant to EU e-money licence holders, who were at risk of losing the right to process payments within the EU in case of no-deal Brexit. Surely there are several EU countries, where alternate licencing requests have seen an uptake, yet one country outpaces others, with Lithuania second only to the UK in the number of licences it has processed and issued.
The ongoing Brexit situation has stirred quite a bit of uncertainty for businesses: even though the government of the UK will undoubtedly try to stabilize the current situation in the financial technology sector, the uncertainty is the biggest obstacle to any investment.
Increasing numbers of UK fintech companies in Vilnius
As a result, in 2018 alone, about 100 UK fintech companies reached out to the Bank of Lithuania, seeking information on investing in Vilnius. Fintech companies like Revolut, Transfer Go, Instarem and Revel Systems chose to obtain licences in Lithuania. They are followed by other firms discovering a vibrant Fintech hub in Vilnius, where they can consult the approachable and progressive regulator, have access to a highly-skilled talent pool, and enjoy other benefits that stem from moving the office to Vilnius.
One of the best examples of seeking an alternative gateway to European payment processing is fintech unicorn Revolut that has obtained both the Lithuanian e-money licence and a banking licence in 2019. Also, Revolut moved all of its Lithuanian clients to a newly-opened Lithuanian operations branch. In the announcement following the move, Revolut stressed: “The great thing about our new licence is that in the event of a no-deal Brexit, we can continue to provide you with all of the services you know and love.”
As the number of licences issued grows, a migration of fintech companies to the Lithuanian capital Vilnius increases. According to Invest Lithuania, Lithuania was already home to over 170 fintech companies during 2019, a number that increases by roughly 45% each year. With such growth, experts predict Vilnius might replace London’s status as the EU’s fintech capital.
“After Brexit, Lithuania would become a leading country in the European Union in the number of non-bank FinTech licences issued, mostly due to a large number of local electronic money and payment institutions. While this is an accomplishment caused by consistent work of various government institutions, it is also a great responsibility. Lithuania should become more active in shaping the upcoming regulation of the sector on the European Union level as well as setting up a competence center for risk mitigation and anti-money laundering,“ says Titas Budrys, Chairman of the Board of “Fintech Hub LT“ association.
Why is Vilnius attractive to fintech companies?
According to fDi Intelligence, the most attractive benefits of Vilnius are its business-friendly regulatory environment, open data policy and successful integration of newcomers.
Vilnius was recently ranked as the number one city in The Tech Start-up FDI Attraction Index 2019 by Financial Times’ fDi Intelligence division. In 2019, fDi Intelligence ranked Vilnius among the top 10 fintech locations of the future based on FDI performance. Additionally, the city was ranked as being second in the cost-effectiveness for fintechs category.
Furthermore, fintech company settlement and integration is a top priority for institutions like Go Vilnius and Invest Lithuania.
“Vilnius puts in a lot of effort to help the companies establish and settle their centres here. The city provides a strong talent base for all tech firms and is very hospitable to expats,” said Inga Romanovskienė, the CEO of the business and tourism development agency “Go Vilnius.”
Easy expat accommodation and local talent base of EU nationals are very important to fintechs migrating to Vilnius from the UK.
Go Vilnius offers an online relocation guide and organizes regular workshops for newcomers to the city, explaining Lithuanian tax procedures, healthcare system, real estate market, etc. The workshops are followed by the guided tours of the city and networking events.
Rapidly growing business relations between Lithuanian and British companies have even led the Lithuanian authorities to initiate direct flights from Vilnius to the central City airport in London.
According to recent insights, almost half of London-based fintech companies are owned by EU nationals and 28% of their staff come from EU countries other than the UK. These companies will be affected by Brexit as the proportion of the staff who have to go through the visa process may grow substantially.
It is only one of the complications that London-based fintech firms will face with all the Brexit-related uncertainties looming. Even after the new Boris Johnson’s deal got approved by the Parliament, there is little clarity of how the fintech reality in the UK will change post-Brexit.